Make 70% of Problems Go Away at Zero Cost

High volume builders work really hard to turn over near-perfect homes on completion. This is a fact, and they often invest thousands of dollars and man-hours into systems to try to achieve this worthy goal.

But high volumes create their own challenges, and most homes have a few issues to resolve after the homeowner moves in.

Builders will try to clear off the items remaining as listed on possession or inspection forms, but it often takes months to co-ordinate the process. This time lag sets up frustrations in the homeowner’s mind.

But the builder is dealing with the fifty or so homes currently in construction, and the endless stream of new projects further complicates cleaning up the leftovers.

Whether by design or by default, high volume builders have learned that 60 to 70 percent of the “lists” or complaints will go away in time, simply because homeowners will eventually give up, or better yet, do the repairs themselves.

This odd phenomenon likely perpetuates the cycle, as over-worked service departments just cannot keep up with the stream of needs.

*more on next blog

When Service is an Issue

I received a call today on a service issue. The item was typical, windows gathering condensation on the glass and elsewhere in the cold months of winter. The issue was typical too…..after many calls, letters, and e-mails the client still could not convince either the builder or the warranty provider to do anything.

In fairness to the builder, I have seen several cases where the lifestyle of the family in the home loads up the interior air with many times the normal amount of vapor. I am not sure any current residential system will perform well if abnormal amounts of cooking, washing, and showering load the air with many times the normal water vapor. It has to condense somewhere, and it will always condense on cooler window glass. Always.

The problem with this case is that the homeowner had taken it far enough along the process to get the Warranty Program to act as conciliator. The homeowner paid a few hundred dollars to the Program to access this service, as did the Builder in this case.

The thing is, no-one anywhere in this scenario ever opened up a wall or removed a trim board to verify if the windows were installed and insulated correctly. They all just stood and pointed moisture meters around and made their pronouncements.

That, to me, is neither service nor warranty.

The Truth About Custom Builders

Compared to a tract builder, a true custom builder will cost you $20,000 more per house right out of the gate, minimum. Why, you ask?

Well, number one, he or she pays all their trades more (about 10 per cent more) than a tract builder. The reason for this is simple. True custom builders want the building experience to go well for the client and the trades. So he will pick the cream of the crop — the better framers, the better finishers, etc. Then he will develop an attitude of co-operation and excellence among them all, so that they behave like a team and take pride in the work they do.

Unlike the tract builder — who will beat and berate his “team” to produce high volume at the lowest cost — the true custom builder treats his team like a big family, develops loyalty, and generally fosters a healthy climate around the work he manages.

Clientele of a true custom builder can rely on being able to speak to the builder directly during and after the construction process. This is key, and if you are getting access to the top banana then you are getting time with someone who has the power to make decisions on the spot, who knows the most about the process and, of course, whose time is worth a lot of money.

So remember: if you are looking for a simple home-buying experience, buy “off the shelf” from the tract builder and keep the costs down by avoiding any changes to the plans. They are absolutely the best deal, and now you know why.

But if it’s going to be your legacy home — something you want to put your stamp on, and you can see the kids growing up and graduating from it — maybe you ought to explore custom a bit more. Fond memories start with a good building experience.

A Shout Out To Gerry

A couple of years ago I was attending a Homebuilders Association banquet as a builder. I had a couple of entries in the competition and was hoping for an award. It didn’t happen for me — I had to wait another year, finally bringing home the gold at the next banquet.

But Gerry did bring home the gold that night.

Let me tell you a little about him. Gerry and his partners are my direct competitors in our market here. Years ago we both worked for a tract builder. I was management, while he was a foundation contractor. We often locked horns on the job sites, but I grew to like him. Gerry worked hard at everything he tackled.

Gerry runs a company out of La Salle, Man. now. The company offices are right on the main street of the community. If you want to talk to their staff about a house, just walk into the office — their door is always open.

Anyway, I went over to congratulate Gerry on his win that night, and asked how business was going for him and his partners. Over the next half an hour, I got a pretty good picture of the culture of their business.

At the time, their main focus was La Salle. They did their own selling by just being approachable and present in the community. Gerry moved right into the middle of the subdivision where they were working, so his customers became his neighbors.

It reminded me of my experience for another builder, years ago in Stonewall. I too moved right into the middle of the subdivision, and my 15 clients per year became my new friends and neighbors. It’s the same now twenty years later.

So, Gerry falls into my description of a true custom builder. His values include building a long-term relationship with his clients, one that goes beyond the mandatory one year warranty period. And Gerry is making the personal sacrifices to make this happen.

My hat’s off to you Gerry, and all the guys at Paradigm Homes in La Salle. We may compete against each other, but I never mind competing against a worthy peer. Keep up the good work!

The Unfocused Builder

I once worked for a small builder who wanted to become a true custom builder. I ran his company for a few years, and used this principle of direct access to build the business up for him. There was, of course, a price to be paid personally: lots of off-hour phone calls, lots of weekend and evening meetings in people’s homes, lots of personal effort spent going “beyond the call of duty.” But guess what — it worked.

Sales went up over time, pretty much doubling every year. We were always a more expensive builder than the tract builder competition, but our clientele gravitated to us because of the personal touches that showed we cared.

But one day the company’s directors decided the systems were good enough, the market share was strong enough, and they were ready to be aggressive. Sadly, the company became neither a tract builder nor a custom builder, but rather just an over-priced and under-performing tract-behaving builder.

When The Price Isn't Right

I had an interesting conversation yesterday with a very frustrated sales agent.

It seems his builder’s pricing has become non-competitive in the market they are positioned in, and it’s tough for him to close any sales.

While I can sympathize with his point of view, it’s not always about price in this business.

Remember that reference site ontariocontractors.com I spoke about in a couple of previous blog posts? There is a calculator there that illustrates the difference between three types of builders: tract, custom and high end.

The term “tract builder” came out of the 50s, when the post-war baby boom was occuring and developers were buying up whole tracts of farmland on the outskirts of every major city in North America — literally manufacturing whole suburbs at a time.

These major builders are experts at low-cost, high-volume construction. They are a bit like Ikea, or Walmart. Systems replace people, and price point rules. They serve the mass market very well, and bring thousands of new homes to market every season. We absolutely need them; our economy relies on them greatly.

I worked for tract builders for years, and I have an appreciation for their organizational ability and their financial strength. But at the same time, it vexed me to see how inflexible they can be in dealing with trades, suppliers, and homeowners.

Basically, there is nowhere else where the phrase “you get what you pay for” applies so well. Tract builders put out reliable, well-planned standard plans. As long as this is what you are looking for, they are your best bet. But if you want to customize, or think you may want to be part of the process, you are going to be a lot lighter in the pocketbook and a lot more frustrated when it’s all done if you choose a tract builder for a custom home experience.

Tract builders make their profits on the extras. Believe me when I say what you save on the original price will be long gone and more before the roof is shingled. Average upgrade fees are between $20,000 and $50,000 (This number was given to me today from a tract builder’s sales rep being unusually candid.) That’s the average “plus” every buyer ends up paying over and above the list price. And that number is from a builder who produces over 200 homes each year.

My frustrated friend is in a tough position, though. His builder claims to be a custom builder, but behaves like a tract builder. Without the volume and the organization behind him though, he is priced as a custom builder with a tract builder’s attitude. The two do not make a good combination.

This is a rather funny video from the early 80's but is shows the process of the framing of your home nicely! Just FYI...

http://tinyurl.com/framingvideo

Enjoy!

Here is an article from a builder in Australia with a couple of simple tips on building a home.

http://tinyurl.com/ozzybuildertip

Enjoy

Time For a Pep Talk

Today I overhead a sad comment. Someone — remarking on the fact that there is lots of negotiating involved in building a new home — said, “That’s the reason I’ll never build new.” How sad — but it made me think.

For years, I assumed I’d never be able to enter a marathon. The combination of bad knees, too much weight, and age made me think it was impossible. Then someone challenged me. Six weeks later, twelve pounds lighter, and feeling ten years younger, my mind no longer ruled out this possibility!

I sometimes need a push to work on personal development. Recently, I hired a personal coach to help me push through a fitness challenge. It was a lot of hard work but, the thing is, nothing can describe how good it felt to push through.

Did someone deceive you into thinking you can’t handle building your dream home? Did someone else’s bad experience set you up to dismiss the possibility? Forever?

Hey, when I’m puffing and sweating on the treadmill it’s no picnic, to be sure. But I started something I thought I could never do, and I’m doing it. And the sense of accomplishment — the sheer magic of getting past my “head” for once in my life —really cannot be described. It’s wonderful!

So don’t rule out your dream home so fast. Don’t settle for second best just because someone else made up your mind for you. There is lots of help and lots of coaching available these days.

Become knowledgeable in a brand new area of life, take charge, make a deal! This might just be the best thing you ever did for yourself!

We’re pulling for YOU

Just a Random Enquiry

Today the phone rang, and the questions raised by the caller were worthy of a blog post. So here goes.

The caller had purchased a show home from a builder, gone through the normal process of inspecting the house with the builder on the possession date, and had been living there now for more than a year.

The caller had been in touch with the builder about getting some year-end warranty work done. He was surprised to learn from the builder that he had bought the show home “as is” and there was no year-end warranty.

I asked him what sorts of things needed attention. One was an electrical box left hanging loose out of one of the kitchen cabinets. That item alone is a building code issue, so it surpasses any warranty limits anyway.

My advice? Ignore the builder’s stated position. Make a careful list and submit it in writing to the builder, while also submitting a copy to the builders’ warranty provider. Then be patient, but re-submit the list to both parties every month.

Why? Well, what the builder probably won’t admit is that pretty much any complaint that comes to a warranty provider will be dealt with. It just takes time. In most cases, they open a file and contact the builder on behalf of the customer within a few weeks.

Most builders don’t want any open files with their providers, as these folks hold financial security against the builder, and open files mean higher premiums in the future.

So, when your builder says “no”, just ignore the answer and step it up to the next level — nicely, of course, but firmly.

Subscribers to our insider mailings will have access to a more detailed solution to these sorts of issues, but this is sufficient to deal with most builder problems.

Ask The Right Questions

There are so many things needed to fulfill a contract, and many of them are glossed over in the initial process.

Let me park on just ONE item that will make a big difference.

Most folks — 94 per cent of them actually — ask one wrong question: “What will be the date we move in?”

Let me repeat: asking about the possession date is the wrong question. And the builder’s contract leaves enough loopholes to drive a truck through this one clause. So ask questions that can be verified, to hold the builder accountable:

1. When will the permit application be submitted to the city?

2. How many days following the permit issue will the excavation be done?

3. By what date will the foundation be poured?

4. By what date will the roof be shingled?

5. By what date will the drywall be completed?

6. Are you (the builder) aware of any seasonal delays we can expect? If so, describe them.

7. Will you (the builder) advise us (the purchasers) in writing of any delays or changes to the schedule within 48 hours of the delay occurring?

These are tough questions that any builder will hate to be asked. But the truth is that any builder can refer to his or her own schedule of work and answer each question honestly within a matter of minutes.

Over time you will be able to hold the builder to a higher level of accountability, and your project will always be at the top of his or her priority list.

There’s lots more, so keep reading

Setting Up The Negotiations

Contrary to popular thinking, builders will negotiate. You just have to be smart about how you set up the process.

Walking into the builder’s show home and falling in love with the colors, the layout, and the sales rep’s smile isn’t part of the process — at least not your process. It is part of the builder’s process, carefully planned out to ensure you pay full price for what the builder wants to offer.

So take a step back. Go over your notes, review your research, think about those referrals YOU uncovered, and take a deep breath.

OK, now you can go in and talk to the sales rep!

Just remember to remove your emotions from the process. This is a business deal, so take it seriously and be ever so thankful you did your research.

Much more on the actual contract to follow.

Choosing A Contractor

Whether choosing a builder or a subcontractor, a couple general rules apply:

1. Are they known? For example, are they listed in the phone book? Seriously, in this age, some are not — so how would you find them when you need them?

2. Will they freely give you references? Let me park on this one for a bit.

When building, I kept a handful of my best clients available as referrals. But what about the ones the builder would not want you talking with? How do you uncover some of those references to balance the “nice” ones you are getting from the builder?

If you have been watching the area for some time, you will have noticed other homes the builder has just completed. If someone has moved in, it may be well worth your while to knock on the door and introduce yourself as a potential neighbour. What you learn could save you a lot of money and give you insights into the builder you may not get any other way.

It’s old-fashioned, shoe-leather work, but think about it. You might even feel uncomfortable walking up to a stranger’s house, but most folks are happy to help out and will give you tips that will make the effort worth it.

Believe me, you will want this information in your hands when you go to negotiate for your home. And if all the referrals are bad or hard to get, maybe it’s time to dump this builder and find someone else.

Don’t forget to join the community of GLG (our “tribe”) where you can meet up with lots of your peers who have built, will build, or know a friend who built. We all have lots of stories to share.

The True Benefits of Research... And How To Do It!

Not wanting to sound too long in the tooth here, I’ve likely worked with over a thousand couples over the years, planning and building custom homes.

Of course, every one was different, but there were some common denominators that either paid off in benefits or added to stress levels.

BENEFITS

People who do their research beforehand always benefit when negotiating with a builder. Simple things like overall size and design — is it going to be a two-story or a bungalow? — really help the builder focus on what he or she can offer.

Here’s a useful exercise: do a quick calculation of cost-per-square-foot on advertised homes, comparing different styles and sizes. You will soon learn the trends and see the big impact that style and size have on the base price. Very large bungalows are much less per square-foot than their small counterparts, for example. Your builder can explain why, but if you start off with the basic knowledge it will help you out in the end.

Once you have a size and design in mind, it’s time to have draft floor plans drawn up. Your builder can look after this for you, or you can hire your own drafting service to do this essential part of the negotiations.

The benefit to hiring a drafting service is that you control the process. The cost, in reality, is usually around $500. (If you can’t find a drafting service, or one that will work with you, get in touch with our office and we can refer you to a couple.)

Remember that first exercise? Now take that same process and focus on ads for YOUR size of home and YOUR style. Make sure you are comparing only builders and models that closely resemble what you are looking for. Make a comparison of square-footage costs (base price only, no land, no upgrades) for as many builders and models as you can find.

Pull information from Parade of Homes magazines, the Saturday paper, the Real Estate News, and any other source you can find. Phone listed representatives for each builder and ask for comparison pricing. This is all ADDING KNOWLEDGE and you will be well equipped when you finally sit with a builder to negotiate a deal.

COSTS

The cost of NOT doing the research will be all of the following and more:

1. The builder will be able to dictate price and you won’t have anything to compare.
2. The builder will be able to dictate design and can steer you toward designs that the he or she is most comfortable with.
3. You won’t necessarily get the home of your dreams.

Now, there is a lot more to this process than what I’m explaining. But my point is that the information is available to you — for free. If you take the time to dig up that information and learn to work with it, you will feel more in control and your stress levels will be a little lower. You may also save a lot of money in the process — and be well paid for the time you spend.

Start A Budget

Before we go to the builders for a proposal (or maybe we’re going to build this ourselves anyway on our own lot??) there is a bit more research to do.

Try a site like www.ontariocontractors.com for some neat calculators and checklists. Sites like this are a goldmine of information, whether you are building your own home or looking for a contractor. If Ontario is not your province, most of the material is still relevant. Remember what I said about the effect of square-footage on cost? Play with their cost calculator for different sizes and styles of home, and you will see what I mean.

If you are going to build this home on your own, you are going to need a budget. So let’s take a few minutes and see what the process looks like.

First of all, it’s unfair to ask a builder or a supplier to give you a quote on a “sketch”. This is the stage where you are going to need full working drawings. These will cost you between $1,000 and $2,500, depending on the size of the project.

Here’s a tip: Builders are often asked to quote on sketches and rough drafts for homes. As a builder, these sketches are loaded with potential problems and misunderstandings, and therefore the builder will weight his quote to compensate for the risk. So that $1,000 you didn’t want to spend on plans could become as much as $6,000.

Check one last time that the SIZE and STYLE of home matches with your PERSONAL BUDGET and meets your NEEDS. If it feels right, go ahead and have plans drawn up and pay for them — stay in control of the process. Again, hire your own drafting service if you can and if the builder will allow it.

Where Are You Going To Build

The vast majority of us will be building in organized development areas. Within most of these areas, there will only be a handful of builders to choose from. It’s sort of an “Old Boy’s Club” in many ways.

The good news is that, in this environment, your research will really pay off. You may want to focus down on one specific quadrant of the city, and then find the few relevant developments.

More research! Drive around each development and make a list of the active builders — you should be able to identify all the builders you could potentially work with. They generally fall into two categories: the high-end builders and all the rest.

Now you need to get out of your car and do some footwork. Spend a couple of Saturdays going through your focused builders’ show homes. Pick up plans, prices, and lot lists as you go through. Ask questions and write down the answers.

The reps are there to make sales, of course, but they know they spend 95 per cent of their time answering questions, and 5 per cent actually working on sales. That’s their job description, so don’t be shy to ask questions. The way they answer will help you determine their attitude and likely the attitude of the builder they represent. Get to know all of them if you can!

There is tons and tons more to this process, and we’re just getting started. Now that you are focused on where you want to live, we are going to walk you through the process step by step. It’s time to get a little excited, but don’t get carried away yet. Play it cool and gather the facts — we’ll pick the time and place for the actual negotiation.

Huge Resource Already Out there!

There is an excellent presentation on www.ontariocontractors.com titled “Build a home and stay married”

There’s a simple calculator on this site that will be useful in comparing pricing for various styles and sizes of home you may be considering.

The actual numbers will differ for current prices and also for your specific location, but the ratios are about right.

You can also download and print an excellent budget document from the same site, which is useful because there’s a lot of work involved in creating a budget for a home project.

Many builders don’t take the time to develop a proper budget going into a project, simply due to lack of time. This is always a mistake — sometimes it hurts the builder, but more often it hurts the client. If you do your research properly before you start negotiations, your knowledge should translate into savings for you.

So it all comes back to research. If you are spending $200,000 or more on a new home, why not research it thoroughly and maintain financial control of the process?

It can be daunting to even think about finding the subcontractors and suppliers to supply prices and fill in the blanks on the budget, so here are some tips: Sometimes local lumber-supply companies will recommend trades. Your local homebuilders’ association is also a good source of names, and of course there is always the Yellow Pages. Just get multiple prices for each major component, and we’ll discuss how to compare the prices and companies in a later post.

There is a ton of work involved in this phase so if you need help, just ask. “You can do it, we can help” as the Home Hardware slogan states.